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Hoodless Brennan Daily Small Cap News Flash including ClearStream, Intelek, Antonov, Synchronica, Toumaz Holdings, Glisten and others
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ClearStream (CTN, 23.5p, £10.8m) reports prelims to 31 July 2009. Revenues up 51% to €13.9m (2008:€9.2m) driven by a substantial increase in co-labelling sales. The group delivered a maiden pre-tax profit of €1.9m (2008: loss €1.2m) and EPS of 0.06c (2008: -0.04c), ahead of market expectations. Net cash at the end of the year stood at €2.9m (2008: €0.09m). We are impressed by the excellent progress the company has made over the past 18 months. The group has: 1) added new own-branded products to its portfolio, obtaining CE Mark approvals for 5 new devices and with the registration of 62 devices into new territories 2) added further distributors, 3) won a significant contract with CR Bard, 4) extended its distribution contract with Cordis (a J&J subsidiary) by two years and 5) entered into a contract with a leading Japanese medical devices company, Terumo, to develop a new catheter platform for peripheral use. The market forecasts 2010 pre-tax profit of €0.45m and EPS of 0.89c – which puts the shares on 29x, which seems expensive. However, on a revenue multiple, the group trades on a historic revenue multiple of 1x. On this basis, we retrain our SPECULATIVE BUY recommendation.
AssetCo (ASTO, 63p, £57.2m), has signed a 10 year joint venture agreement with Abu Dhabi Government / Critical National Infrastructure Authority, to develop and manage a 100-acre multi-agency emergency services training centre. The share price has gone up 27% since our Buy recommendation on the 5/10/09 (share price 49.75p). The group trades on 6.4x in 2010 falling to 6.3x in 2011. We retain our BUY recommendation and our target price of 70p.
Intelek (ITK, 15p, £13.1m) has received further orders for the supply of multi-frequency band solid state power amplifiers for an ongoing U.S. government programme, valued at $0.7m. This brings the total order value from this client to $3.0m in the current financial year. We retain our BUY recommendation with a one year target price of 16.8p.
Antonov (ATV, 40p, £6.37m) Has published its prospectus for the admission of its shares to trading on the Amsterdam Euronext exchange. Admission is expected on the 5th November. We remain very concerned over the direction that Antonov is taking, Amsterdam’s exchange and the way the shares are held make it very difficult to identify key shareholders. We maintain our SELL recommendation.
World Careers Network (WOR, 95p, £7.46m) Finals to June saw revenues fall to £4.80m (£5.16m) with pre-tax profits down to £0.74m (£1.134m) with 6.54p (9.87p) EPS and a maintained 3.5p dividend for the year. The group has £3.5m net cash – post the purchase and cancellation of 253,831 shares. Profits were hit by the decision to maintain operating expenses, headcount reduced by just 2 to 72, while losing some clients due to consolidation in the financial sector. While some companies in this sector are seeing signs of recovery, this group is warning of continued lower levels of activity and it is maintaining new software product development – so profits will decline again this year. The group should remain cash generative so taking a 4.5% yield as a support level would imply a price of 77p – assuming a held dividend. Moved from a Hold last iterated on 27/04/09 at 112.5p to SELL with a price target of 77p.
Alkane Energy (ALK, 18p, £16.72m) Has signed a tolling agreement, a form of sub-contract energy generation, with GDF Suez. The agreement will see excess generation capacity of 7MW generate revenues around £0.3m using natural gas supplies. The company has also signed an agreement for 2MW of Shirebrook’s coal mine methane (CMM) generation with the same company. ALkane is cash generative and has a hidden asset that is potentially worth the current market capitalisation, the UK CMM licences, but is being hit by lower electricity prices than previously fixed in the short term. We remain confident for the longer term and believe Alkane’s expertise and licences are worth considerably more than the current share price – we repeat our BUY recommendation last iterated on 16/09/09 at 23.75p.
Cryptologic (CRP, 297.5p, £38.16m) Has won a multi-year contract with Unibet for one of its top on-line slot machine games with another 6 expected by the end of 2009 and an additional 3 the following year. Unibet has more than 3.6m users and takes Cryptologic’s customer base to 29. Still a SPECULATIVE BUY.
Sanderson (SND, 18.5p, £8.03m) Trading update for the year ending September 2009 is encouraging with improved market conditions since August, when the company agreed new banking facilities. As a result the group expects results slightly ahead of expectations and the new year appears to be continuing the same momentum. Forecast to September 2009 were for £1.7m PBT with 3.7p EPS and 0.45p DPS, moving up to £2.1m PBT with 4.57p EPS and 0.6p DPS, putting the group on a PER going historic of below 5 times and a Yr2 prospective PER of 4x with a yield around 2.4%. BUY to the 6.5x prospective PER level of 30p.
Synchronica (SYNC, 3.625p, £20.93m) Has won a contract with a 4th African operator worth some $0.27m with on-going professional support..
Toumaz Holdings (TMZ, 8.625p, £39.9m) has begun clinical trials of its Sensiumtm "digital plaster" wireless body monitoring system at St Mary's Hospital, London (part of Imperial College Healthcare NHS Trust). Once trials are complete in Q1 2010, the disposable digital plaster is expected to receive CE accreditation enabling commercial sales in Europe. Trials in US hospitals will commence in H1 2010. We maintain our HOLD recommendation.
Bglobal (BGBL, 50.75p, £37.6m) will place 4.59m new ordinary shares to raise £2.25m at 49p. The new monies will be used to fund the accelerated roll out and delivery of meters, which will provide a higher consistent level of monthly installations with an increased buffer of new stock. We retain our SELL recommendation.
Probability (PBTY, 54p, £11.7m), the mobile gaming specialist, reports interims to 30 September 2009. Net gaming revenues down 5% to £2.5m (H109: £2.6m), but 5% up from H209. An increase investment in technology and people drove the group to pre-tax losses of £0.26m (H109: £0.0.17m). Net cash stood at £2.0m. Probability has launched new games, added 116,619 new players to its register, won new contracts, and entered a partnership agreement with Orbis and business development agreement with Dragonfish / 888.com. The group will continue to invest in technology and people, which will defer profitability at least until 2011, but will allow the group to grow faster and in more product areas. We expect the market to downgrade current 2010 pre-tax profit estimates of £1.5m and EPS of 6.8p and 2011 pre-tax profits of £2.0m and EPS of 9p, to a loss for the current financial year. The group may require funding to finance the increase in investment. We adjust our recommendation from a buy to a SPECULATIVE BUY.
MTI Wireless Edge (MWE, 12.25p, £6.3m), the manufacturer of flat panel antennas for fixed wireless broadband, reports results for the 9 months ended 30 September 2009. Revenues down 24% to $10.3m (Q3: $13.6m), gross margins maintained at 35%, but pre-tax profits collapsed to $0.24m (Q3: $1.2m). The cash generative businesses ended September with net cash of $3.1m. The current economic climate combined with a reduced telecommunications infrastructure spend has reduced the visibility of the forward order book. There are currently no estimates in the market. We would expect FY09 pre-tax profits of around £0.26m and EPS 0.29c, which puts the stock on a demanding 2009 PER of 72x and EV/EBITDA of 30x. However the strong balance sheet with NAV of $19.7m (goodwill of £0.41m), encourages us to retain our SPECULATIVE BUY recommendation and our target price of 15p.
Alternative Networks (AN., 117.5p, £51.27m) Has announced the acquisition of Aurora Kendrick James Group (AKJ), a provider of billing and customer services software, for a maximum consideration of £5.5m. Initial consideration of £3.57m and £0.8m in shares is followed 1 year later by up to £0.75m cash and £0.2m in shares. The deferred consideration is dependent on AKJ growing contracted revenues (i.e. support & licence) 10%. The group anticipates the acquisition will be modestly EPS enhancing in the current year. The group has used AKJ’s software for 10 years, spent some £0.35m with AKJ over the last 2 years, and the acquisition ensures AN is in control over a key interface with its customers. In addition AKJ has won a contract worth approximately £1m over 3 years for the provision of billing and customer services to a major network operator. In the year to July AKJ turned over £3.6m (up 4%) with EBITDA of £0.58m, PBT of £0.3m and had net assets of £2.3m at the period end. Post tax profits have been boosted by a low tax charge but that will rise from around 14% to some 22% as part of the larger group. Forecasts for the 2010 year around £9.7m put the group on 7.7x prospective PER – leaving some modest upside. We repeat our BUY Recommendation with a 137p price, last iterated on 01/10/09 at 106.5p.
Suretrack Monitoring (STMP.PL, 1.25p, £4.85m) Interims to July 2009 saw revenues rise 11.75% to £0.28m (£0.25m) and gross profits surge to £0.16m (£0.10m) though an increased administration charge led to a pre-tax loss of £0.08m (Break-even). More importantly the group reports that it and IBP, acquired in March, are profitable on a month to month basis. The group expects, as we do, a much stronger second half as it benefits from its concentration on the larger corporate accounts. The ability to offer a tracking network that encompasses Europe expands the market potential as well and is seeing a number of additional clients being won overseas already, for both Suretrack and IBP. The group remains a SPECULATIVE BUY.
Glisten (GLI, 77.5p, £11.0m), the confectionary and snack foods group, reported prelims to 30 June 2009. Revenue up 1% to £74.4m (2008: £73.8m), gross margins fell to 21.1% (2008: 23.9%), normalised pre-tax profit and EPS halved to £3.4m (2008: £6.7m) and 17.5p (2008: 34.1p) respectively – below market expectations. The group ended the year with net debt of £24.8m and have confirmed banking facilities of £32m. As expected, the dividend has been scrapped. The group has had a good start to the year with like-for-like sales ahead 13% at £25.0m after 17 weeks of the year. Group margins are in line with forecasts and all parts of the business are in growth and profitable. The market forecasts 2010 pre-tax profits of £4.1m and EPS of 20.4p. The stock trades on a prospective PER of 3.8p, a discount to the market, but is highly geared. We initiate with a SPECULATIVE BUY recommendation.
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RISK WARNING NOTICE
All investments are speculative and prices may change quickly and go down as well as up. Past performance will not necessarily be repeated and is no guarantee of future s uccess. There is an extra risk of losing money when shares are bought in some smaller companies including “penny shares”. There can be a big difference between the buying price and the sel ling price of these shares and if they have to be sold immediately, you may get back much less than you paid for them or in some circumstances, it may be difficult to sell at any price. It may also be difficult for you to obtain reliable information about the value of this investment or the extent of the risks to which it is exposed. Where a company has chosen to borrow money (gearing) as part of its business strategy its share price may become more volatile and subject to sudden and large falls. This investment may not be suitable for all investors, and clients should carefully consider their own personal financial circumstances before dealing in the stock market, particularly those on fixed incomes or approaching retirement age. If you have any doubts you should seek advice from your investment adviser or your broker at this firm.
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